Thursday, July 27, 2006
It's World War 3!!!!11!!!1
So there is much that could be said about the Middle East. But I think the most interesting part for me is an opportunity missed. Back when this started (even before Hezbollah became involved) this fellow in Syria, Khaled Meshaal, a member of Hamas, instigated a kidnapping in Gaza. The Hamas leadership in Palestine was obviously taken by surprise, and their initial impulse appears to have been to open a dialogue with Israel to contain the situation. They were initially willing to finally move on official recognition for Israel. The Palestinian PM, also a Hamas member, even wrote a column in the Washington Post asking not for the destruction of Israel, but for the 1967 borders, the right of return, and East Jerusalem, which is to say the usual peace framework. This was one of those rare dynamic moments where a balance has been upset and change can occur. Israel blew Hamas off and opted for overwhelming military force instead. Hamas soon withdrew their agreement to recognize Israel. I understand that Israel is reluctant to deal with groups like Hamas and Hezbollah, but at some point they will have to recognize that military force has yet to accomplish anything of significance against them. Israel spent 18 years in Lebanon, and left Hezbollah stronger than when they arrived. Military action may be a necessary element of the Israeli response to these incidents, but it will never be the element that produces meaningful progress. For that political and diplomatic action is necessary, and opportunities like the one Hamas presented are as good as it will possibly get.
Understanding Net Neutrality
This is an issue that interested me even before I started work this summer, but I've certainly been immersed in it these past few months. There is a great deal of confusion over it, and many misconceptions. It's really quite simple, but I think it helps to have a little bit of narrative context. From early on in the development of the US phone network up until the late 1960's AT&T (along with the regional Bell companies (RBOCs) that they controlled) was the telecom sector. Starting in the late 1960's the FCC started giving signs that they wanted to create competition, at least in some limited areas, for AT&T. Taking the hint from the FCC, MCI was created in late '60s with the intention of entering the long distance business, and during the 70's did a remarkable job of plugging themselves into the regulatory and legislative machines in DC. AT&T was not about to take this lying down, and a mighty battle ensued. In the end, MCI won and AT&T, as we all know, was broken up. But they were broken up to break their monopoly on long distance, meaning that the key was to sever their connection with the RBOCs, so that MCI and AT&T could both contract for long distance service with them. It left in place the RBOCs' monopolies on local access to consumers. In 1996 Congress tried to eliminate that monopoly as well. The FCC, in its wisdom, savaged this legislation, leaving the local access monopoly more or less in place. As things turned out, the long distance market was really not worth that much. It's so cheap now that companies can basically give it away, and in the context of voice over IP (VOIP) the entire concept of long distance becomes obsolete.
Local phone service, likewise should not be worth much. But the monopoly on local access allows for more than just the provision local phone service, it allows for providers to tie any other service delivered on those lines to the monopoly. The economic theories now dominant in antitrust law say that this should not be important, that tying of products to an existing monopoly should not allow the provider to milk that monopoly for more money than they could get for collecting rent on the monopoly directly. The efforts of the Bell companies to protect their ability to tie services to their access networks argues to the contrary. When Congress tried to break up those monopolies in the 1996 Telecom Act, the Bell companies spent (if I recall correctly) upwards of $250 million fighting against it in court and in front of the FCC. They won that battle, and for their efforts won the right to tie DSL broadband internet service to their monopoly. The cable companies piggy-backed on their efforts and convinced the FCC to give them similar treatment, ensuring us a duopoly on broadband internet service. Consequently we have fallen far behind competing nations on price/performance in the broadband market.
That brings us to net neutrality. Having extended their monopoly to provision of broadband internet, the Bell companies now want to push their monopoly still further, into provision of services over the internet. High speed internet has the ability to deliver phone and video (the equivalent of cable TV) over IP for very low prices. This threatens the monopoly rent that the phone and cable companies have collected on these services for a long time. Once consumers are purchasing their TV and phone service over the internet, the phone and cable companies will have no competitive advantage over other providers. Consequently, they will not deliver high speed internet access until they are guaranteed the ability to block competing voice and video services over those connections to preserve their duopoly (the pathetic broadband connections they now sell lack the bandwidth to provide video service). They may also try to collect rent from other online service providers like Amazon and eBay, but I don't think that's really the objective. And I would be very surprised if they ever got into the business of restricting free speech, or any of the other nightmare scenarios that some net neutrality supporters have suggested.
I'm as big a fan of net neutrality as there is. But it really doesn't go far enough. The phone and cable companies have got us by the balls on broadband service and are threatening to hold high speed connections hostage if they don't get what they want. And they're more than capable of doing just that. Hell, they've already done just that. Many other countries have 10+ Mb/s DSL connections and are seeing rollouts of 100 Mb/s fiber connections. We're stuck with 1 Mb/s connections and we're being overcharged for them. Congress needs to go back and finish what it was trying to accomplish in 1996: open up the local access duopoly. But it needs to do it right: complete divestiture of the local access loops. The network access business should be run like a utility. If that were done, net neutrality would be a meaningless concept, there would be no need for it. Competitive pressure would prevent any service providers from trying to block access to internet services.
Unfortunately, the phone companies have the DC muscle to prevent this from ever happening. They've already spent $50 million on net neutrality and appear to have scuttled an important telecom bill because Democrats (to their credit) wouldn't let it through the Senate without net neutrality. These are some of the costs we pay for having a government for sale to the highest bidder.
Local phone service, likewise should not be worth much. But the monopoly on local access allows for more than just the provision local phone service, it allows for providers to tie any other service delivered on those lines to the monopoly. The economic theories now dominant in antitrust law say that this should not be important, that tying of products to an existing monopoly should not allow the provider to milk that monopoly for more money than they could get for collecting rent on the monopoly directly. The efforts of the Bell companies to protect their ability to tie services to their access networks argues to the contrary. When Congress tried to break up those monopolies in the 1996 Telecom Act, the Bell companies spent (if I recall correctly) upwards of $250 million fighting against it in court and in front of the FCC. They won that battle, and for their efforts won the right to tie DSL broadband internet service to their monopoly. The cable companies piggy-backed on their efforts and convinced the FCC to give them similar treatment, ensuring us a duopoly on broadband internet service. Consequently we have fallen far behind competing nations on price/performance in the broadband market.
That brings us to net neutrality. Having extended their monopoly to provision of broadband internet, the Bell companies now want to push their monopoly still further, into provision of services over the internet. High speed internet has the ability to deliver phone and video (the equivalent of cable TV) over IP for very low prices. This threatens the monopoly rent that the phone and cable companies have collected on these services for a long time. Once consumers are purchasing their TV and phone service over the internet, the phone and cable companies will have no competitive advantage over other providers. Consequently, they will not deliver high speed internet access until they are guaranteed the ability to block competing voice and video services over those connections to preserve their duopoly (the pathetic broadband connections they now sell lack the bandwidth to provide video service). They may also try to collect rent from other online service providers like Amazon and eBay, but I don't think that's really the objective. And I would be very surprised if they ever got into the business of restricting free speech, or any of the other nightmare scenarios that some net neutrality supporters have suggested.
I'm as big a fan of net neutrality as there is. But it really doesn't go far enough. The phone and cable companies have got us by the balls on broadband service and are threatening to hold high speed connections hostage if they don't get what they want. And they're more than capable of doing just that. Hell, they've already done just that. Many other countries have 10+ Mb/s DSL connections and are seeing rollouts of 100 Mb/s fiber connections. We're stuck with 1 Mb/s connections and we're being overcharged for them. Congress needs to go back and finish what it was trying to accomplish in 1996: open up the local access duopoly. But it needs to do it right: complete divestiture of the local access loops. The network access business should be run like a utility. If that were done, net neutrality would be a meaningless concept, there would be no need for it. Competitive pressure would prevent any service providers from trying to block access to internet services.
Unfortunately, the phone companies have the DC muscle to prevent this from ever happening. They've already spent $50 million on net neutrality and appear to have scuttled an important telecom bill because Democrats (to their credit) wouldn't let it through the Senate without net neutrality. These are some of the costs we pay for having a government for sale to the highest bidder.
Off the Bandwagon
First order of business: I am officially off the John McCain bandwagon. It's one thing for McCain to whore himself out on various issues that may not have been critical to him. But he has long defined himself on the two issues of democratic reform and fiscal conservatism. When he declared himself in favor of making the Bush tax cuts permanent (as mentioned in this story) it became crystal clear to me that the John McCain I fell in love with no longer exists. He is, in the immortal words of Obi Wan, more machine now than man, twisted and evil. Perhaps someday when Emperor Cheney is flinging lightning into his son the little sliver of humanity left in McCain will resurface, but I'm not counting on it.
Missing In Action
Fellas, I apologize for neglecting the blog the past couple months. It's been a combination of factors. My work has kept me more busy during the day than has been the case in some time, and I've kept myself occupied in the evenings as well. Additionally, up until the past couple weeks I wasn't inspired much to write about things, and even then I mostly engaged in discussions in other venues. But I'm starting to feel like I've got a backlog of things discuss here, so I'm going to try and jumpstart things a bit. TBWJ has not come to an end. Of course, y'all have been a bunch of lazy bastards too.
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